The South Korean government is intensifying its push for productive finance, leading to a rapid shift in the flow of corporate loans from banks toward the manufacturing sector. However, there are growing concerns that this concentration of limited financial resources on relatively strong borrowers, such as large manufacturers, may reduce access to financing for small businesses and self-employed individuals.
As of the end of June, the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—reported a manufacturing loan balance of 221.53 trillion won, marking a 10.9% increase (21.7 trillion won) compared to the end of 2024. This means that 40% of the total increase in corporate loans from these banks during this period came from the manufacturing sector.
In contrast, loans for real estate and rental businesses, which make up the largest share of corporate lending, only grew by 3.3% (7.2 trillion won) to reach 223.19 trillion won during the same timeframe. The gap in loan amounts between manufacturing and real estate sectors has sharply narrowed from 16.15 trillion won at the end of 2024 to just 1.66 trillion won by the end of June.
This trend aligns with the government's recent initiatives to promote productive finance, which aims to redirect financial resources that have been flowing into asset markets like real estate toward corporate production and investment activities. As a result, banks are increasing their funding for the industrial sector, including manufacturing.
Loans for real estate and rental businesses are considered stable corporate financial assets due to their reliance on real estate collateral. However, as banks shift their focus to increasing loans for manufacturing and other industrial sectors, changes are occurring in their corporate lending portfolios.
Consequently, sectors with a high proportion of self-employed individuals, such as services, are facing greater financial burdens. Recent trends in loan growth also indicate a bias toward strong companies. As of the end of last month, the balance of loans to individual business owners at the five major banks was 325.95 trillion won, a mere 0.1% (4.5 billion won) increase from 325.49 trillion won at the end of June, while loans to large corporations surged by over 11 trillion won.
As corporate lending increasingly favors the manufacturing sector and large enterprises, there are concerns that funding opportunities for industries heavily reliant on self-employed workers may diminish. A survey conducted by the Korea Federation of Small and Medium Businesses earlier this month revealed that 25.5% of small business owners faced difficulties in securing financing through banks compared to last year's Chuseok holiday. The main challenges cited included insufficient loan limits (40.5%), high interest rates (37.9%), and stricter collateral requirements (30.7%).
Seoji Yong, a professor at Sangmyung University, stated, "If banks concentrate on lending to strategic industries and strong companies, it could make financing even more difficult for self-employed individuals. We should not uniformly exclude non-manufacturing sectors but instead assess based on cash flow and repayment ability while also providing support for working capital and guarantees for small businesses."
* This article has been translated by AI.
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